Judgment summary
Diesel Care Limited, a private limited company in the motor vehicle spare parts and construction sector, appealed against a decision of the Commissioner dated 23rd April 2021 concerning additional Income Tax assessments for the years 2016 and 2017 (paras 1-9).
The Commissioner had raised the assessments after finding that taxable supplies declared in VAT returns had not been fully declared in Income Tax returns, resulting in principal Income Tax of Kshs. 27,456,293.00 for 2016 and Kshs. 12,850,976.00 for 2017 (para 5).
The Appellant objected, but the Commissioner declared the objection invalid under Section 51(3)(b) and (c) of the Tax Procedures Act, 2015 (TPA), for failure to pay the undisputed tax and submit relevant documents, confirming principal taxes of Kshs. 33,411,353.00 together with penalties and interest as due (para 8).
The Tribunal, before addressing the merits, raised a threshold question of its own jurisdiction and found that the letter of 23rd April 2021 was a determination under Section 51(4) of the TPA that the objection had not been validly lodged, not an objection decision on the merits under Section 51(11) of the TPA. It held that such an administrative invalidation is not an appealable decision, and that any grievance about it should be pursued by judicial review before the High Court rather than by appeal to the Tribunal (paras 36-47).
Having found no appealable decision, the Tribunal held it had no jurisdiction to determine whether the assessments were justified and struck out the Appeal, with each party bearing its own costs (paras 48-50).
Background
The Appellant is a private limited liability company incorporated in Kenya, carrying on business in the motor vehicle spare parts and construction sector (para 1). The Respondent is the Commissioner appointed under Section 13 of the Kenya Revenue Authority Act, Cap 469, Laws of Kenya, responsible for assessment, collection, accounting and general administration of tax revenue (para 2).
Upon reviewing the Appellant's self-assessment Income Tax and VAT returns for 2016 and 2017, the Respondent formed the view that taxable supplies declared in VAT returns had not been fully declared in Income Tax returns, giving rise to undeclared income chargeable at the corporate rate of 30% (para 3).
By a letter dated 21st January 2020, the Respondent notified the Appellant of the non-declaration and required payment, failing which amended assessments would issue under Section 31 of the TPA (para 4). Additional assessments were raised on 26th June 2020, being principal Income Tax of Kshs. 27,456,293.00 for 2016 and Kshs. 12,850,976.00 for 2017 (para 5).
The Appellant lodged a notice of objection acknowledged as submitted on iTax on 26th July 2020 (para 6). The Respondent, by correspondence dated 31st August 2020, 19th November 2020, 4th February 2021 and 2nd March 2021, requested supporting documentation as it was unable to view attachments uploaded on iTax (para 7).
The Respondent issued a decision dated 23rd April 2021 declaring the objection invalid for failing to meet Section 51(3)(b) and (c) of the TPA, stating that principal taxes of Kshs. 33,411,353.00, together with resultant penalties and interest, remained due and payable (para 8). The Appellant lodged its Notice of Appeal dated 7th October 2025 after being granted leave to file out of time (para 9).
Core dispute
The Appellant's Memorandum of Appeal dated 25th November 2025 raised three grounds: that the Respondent ignored valid purchases declared in VAT returns, resulting in double taxation for 2017; that the Respondent failed to consider valid expenses incurred for the years assessed; and that the objection decision was not valid (para 10).
The Appellant argued that charging full sales to Income Tax without relief for declared purchases caused double taxation, and that the Respondent should have applied an industry profit margin or the filed input VAT to determine cost of sales (paras 13-15). It also argued that the objection decision of 23rd April 2021 was issued outside the sixty-day period under Section 51(4A) of the TPA, so the objection was allowed by operation of law, relying on Rongai Tiles & Sanitary Wares Limited v Commissioner of Domestic Taxes [2023] KEHC 18546 (KLR) (paras 16-17).
The Respondent maintained that its assessments were justified under Section 3 of the Income Tax Act and that it was entitled under Sections 24(2) and 31 of the TPA to assess using available information to the best of its judgement (paras 21-23). It contended that the Appellant had not lodged a valid objection under Section 51(3) of the TPA due to lack of clarity, precision and supporting documents (paras 24-26), and that the sixty-day period ran from the date of the last correspondence, being 2nd March 2021, making the decision of 23rd April 2021 timely (paras 27-28). The Respondent also argued that the burden of proving an assessment excessive lay on the taxpayer (para 29).
Court findings
The Tribunal identified a threshold jurisdictional issue and framed the issues as whether there was a valid Appeal on record and whether the confirmed assessments were justified (para 34).
Examining the decision of 23rd April 2021, the Tribunal found that the Respondent had not confirmed, varied or rejected the objection on its merits, but had declared the objection invalid for failing to meet Section 51(3)(b) and (c) of the TPA (para 37). It noted that Section 51(1) of the TPA requires a taxpayer to first lodge a valid objection before proceeding under any other written law, and that Section 51(4) vests in the Commissioner the power to determine whether a notice of objection has been validly lodged (paras 38-39).
The Tribunal held that the determination that an objection is invalid is an administrative exercise of discretion under Section 51(4) of the TPA, and where an objection is declared invalid, the taxpayer is treated as not having filed an objection at all, barring recourse to the Tribunal until a valid objection and objection decision exist. It held that an invalidation of an objection is not, of itself, an appealable decision (paras 40-41).
The Tribunal relied on Commissioner of Investigations & Enforcement v Vyas t/a Rocon Enterprises (Income Tax Appeal E144 of 2021) [2022] KEHC 16027 (KLR), where the High Court held that a decision declining a late objection was not an objection decision and could only be challenged by judicial review, not appeal (para 42). Applying this reasoning, the Tribunal found that the letter of 23rd April 2021 was not an objection decision but a determination under Section 51(4) of the TPA that the objection was not validly lodged (paras 43-44).
The Tribunal found the Appellant's argument on the sixty-day timeline and operation-of-law objection allowance to be misconceived, as it presupposed that the letter of 23rd April 2021 was an objection decision under Section 51(11) of the TPA, which it was not (paras 45-46). It concluded that the decision appealed against was not an appealable decision, and there was therefore no valid Appeal upon which the Tribunal's jurisdiction could be founded (para 47). Having found no jurisdiction, the Tribunal was precluded from determining the merits of the assessments (para 48).
Outcome
The Tribunal found the Appeal incompetent and ordered that the Appeal be struck out, with each party to bear its own costs (para 49).
Major issues / areas of contention
- Whether there was a valid Appeal on record before the Tribunal.
- Whether the Respondent's letter of 23rd April 2021 declaring the objection invalid under Section 51(4) of the TPA constituted an appealable decision.
- Whether the Appellant's objection had been validly lodged under Section 51(3) of the TPA.
- Whether the sixty-day period under Section 51(4A) of the TPA for issuing an objection decision had been exceeded, and whether the objection was allowed by operation of law.
- Whether the assessments confirmed by the Respondent were justified (not reached due to lack of jurisdiction).